Exhibit 99.1

ADVANCED CHIP ENGINEERING TECHNOLOGY INC.

FINANCIAL STATEMENTS AND

REPORTS OF INDEPENDENT

REGISTERED PUBLIC ACCOUNTING FIRM

DECEMBER 31,
2007 AND 2008



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Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of

Advanced Chip Engineering Technology Inc.

We have audited the
accompanying balance sheet of Advanced Chip Engineering Technology Inc. (the Company) as of December 31, 2008, and the related statements of income, of changes in stockholders equity, and of cash flows for the two years
then ended. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States) and generally
accepted auditing standards in the Republic of China. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial
statements referred to above present fairly, in all material respects, the financial position of Advanced Chip Engineering Technology Inc., as of December 31, 2008, and the results of its operations and its cash flows for the two years
then ended, in conformity with the Business Entity Accounting Law, Regulation on Business Entity Accounting Handling and accounting principles generally accepted in the Republic of China.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 4
(18) to the financial statements, the Company has incurred continuous losses and negative cash flows form operation that raise substantial doubt about its ability to continue as a going concern. Managements plans in regard to these
matters are also described in Note 4 (17). The financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern.

Accounting principles generally accepted in the Republic of China vary in certain significant respects from accounting principles generally
accepted in the United States of America. Information relating to the nature and effect of such differences is presented in Note 11 to the financial statements.

/s/ PricewaterhouseCoopers

Taipei, Taiwan

Republic of China

March 16, 2009



1



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Advanced Chip Engineering Technology Inc.

Balance Sheet

(Expressed in New Taiwan Dollars, Except Otherwise Stated)



|                                                      |  |       |            |  |                  |               |  
|----------------------------------------------------- |  | ----- | ---------- |  | ---------------- | ------------- | -
|                                                      |  | Notes |            |  | December 31,2008 |              
|Current Assets                                        |  |       |            |  |                  |               |  
|Cash and cash equivalents                             |  | 4.    | (1)        |  | $                | 20,514,652    |  
|Notes receivable, net                                 |  |       |            |  |                  | 2,052,591     |  
|Accounts receivable, net                              |  | 4.    | (2),5      |  |                  | 12,803,585    |  
|Other financial assets                                |  | 4.    | (3),(15),5 |  |                  | 1,885,201     |  
|Inventories, net                                      |  | 4.    | (4)        |  |                  | 23,461,594    |  
|Restricted assets  current                           |  | 6     |            |  |                  | 3,100,000     |  
|Prepayments and other current assets                  |  |       |            |  |                  | 18,663,055    |  
|                                                      |  |       |            |  |                  |               |  
|                                                      |  |       |            |  |                  | 82,480,678    |  
|                                                      |  |       |            |  |                  |               |  
|Property, Plant and Equipment                         |  | 4.    | (5),5,6    |  |                  |               |  
|Land                                                  |  |       |            |  |                  | 136,183,400   |  
|Buildings and facilities                              |  |       |            |  |                  | 472,796,423   |  
|Machinery and equipment                               |  |       |            |  |                  | 1,093,491,482 |  
|Transportation equipment                              |  |       |            |  |                  | 453,887       |  
|Office equipment                                      |  |       |            |  |                  | 29,782,649    |  
|Other equipment                                       |  |       |            |  |                  | 13,018,989    |  
|Leased equipment                                      |  |       |            |  |                  | 28,175,645    |  
|                                                      |  |       |            |  |                  |               |  
|                                                      |  |       |            |  |                  | 1,773,902,475 |  
|Less : Accumulated depreciation                       |  |       |            |  |                  | (553,836,068  | )
|Accumulated impairment                                |  |       |            |  |                  | (101,709,257  | )
|Construction in progress and prepayment for equipment |  |       |            |  |                  | 201,820,928   |  
|                                                      |  |       |            |  |                  |               |  
|                                                      |  |       |            |  |                  | 1,320,178,078 |  
|                                                      |  |       |            |  |                  |               |  
|Intangible Assets                                     |  |       |            |  |                  |               |  
|Computer software                                     |  |       |            |  |                  | 7,025,482     |  
|                                                      |  |       |            |  |                  |               |  
|Other Assets                                          |  |       |            |  |                  |               |  
|Refundable deposits                                   |  |       |            |  |                  | 480,000       |  
|                                                      |  |       |            |  |                  |               |  
|                                                      |  |       |            |  |                  | 480,000       |  
|                                                      |  |       |            |  |                  |               |  
|Total Assets                                          |  |       |            |  | $                | 1,410,164,238 |  
|                                                      |  |       |            |  |                  |               |  



2



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Advanced Chip Engineering Technology Inc.

Balance Sheet (Continued)

(Expressed in New Taiwan Dollars, Except Otherwise Stated)



|                                               |  |       |      |  |                  |                |  
|---------------------------------------------- |  | ----- | ---- |  | ---------------- | -------------- | -
|                                               |  | Notes |      |  | December 31,2008 |               
|Current Liabilities                            |  |       |      |  |                  |                |  
|Short-term loans                               |  | 4.    | (7)  |  | $                | 32,893,280     |  
|Notes payable                                  |  |       |      |  |                  | 572,708        |  
|Accounts payable                               |  |       |      |  |                  | 10,892,480     |  
|Payables on equipment                          |  |       |      |  |                  | 51,582,710     |  
|Current portion of long-term loans             |  | 4.    | (8)  |  |                  | 61,408,824     |  
|Accrued expenses and other current liabilities |  | 5     |      |  |                  | 57,050,568     |  
|                                               |  |       |      |  |                  |                |  
|                                               |  |       |      |  |                  | 214,400,570    |  
|                                               |  |       |      |  |                  |                |  
|Long-term Liabilities                          |  |       |      |  |                  |                |  
|Long-term loans                                |  | 4.    | (8)  |  |                  | 120,230,636    |  
|                                               |  |       |      |  |                  |                |  
|Total Liabilities                              |  |       |      |  |                  | 334,631,206    |  
|                                               |  |       |      |  |                  |                |  
|Stockholders Equity                           |  |       |      |  |                  |                |  
|Common stock                                   |  | 4.    | (10) |  |                  | 2,237,959,810  |  
|Accumulated deficits                           |  | 4.    | (12) |  |                  | (1,162,426,778 | )
|                                               |  |       |      |  |                  |                |  
|Total Stockholders Equity                     |  |       |      |  |                  | 1,075,533,032  |  
|                                               |  |       |      |  |                  |                |  
|Commitments and Contingencies                  |  | 7     |      |  |                  |                |  
|Significant Subsequent Events                  |  | 9     |      |  |                  |                |  
|Total Liabilities and Stockholders Equity     |  |       |      |  | $                | 1,410,164,238  |  
|                                               |  |       |      |  |                  |                |  

The accompanying notes are an integral part of these financial statements.

See report of independent registered public accounting firm dated March 16, 2009.



3



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Advanced Chip Engineering Technology Inc.

Statements of Income

(Expressed in New Taiwan Dollars, Except Otherwise Stated)



|                                                  |  |       |      |  |                                  |              |   |      |   |              |  
|------------------------------------------------- |  | ----- | ---- |  | -------------------------------- | ------------ | - | ---- | - | ------------ | -
|                                                  |  |       |      |  | For the years ended December 31, |             
|                                                  |  | Notes |      |  | 2007                             |              |   | 2008 |  
|Operating Revenues                                |  | 5     |      |  |                                  | 60,999,316   |   |      | $ | 83,592,133   |  
|Cost of Goods Sold                                |  | 4.    | (16) |  |                                  | (339,840,710 | ) |      |   | (437,984,253 | )
|                                                  |  |       |      |  |                                  |              |   |      |   |              |  
|Gross Loss                                        |  |       |      |  |                                  | (278,841,394 | ) |      |   | (354,392,120 | )
|                                                  |  |       |      |  |                                  |              |   |      |   |              |  
|Operating Expenses                                |  | 4.    | (16) |  |                                  |              |   |      |   |              |  
|Selling expense                                   |  |       |      |  |                                  | (15,084,914  | ) |      |   | (11,669,525  | )
|General and administrative expenses               |  |       |      |  |                                  | (48,854,547  | ) |      |   | (46,841,902  | )
|Research and development expenses                 |  |       |      |  |                                  | (128,631,792 | ) |      |   | (99,448,352  | )
|                                                  |  |       |      |  |                                  |              |   |      |   |              |  
|Total operating expenses                          |  |       |      |  |                                  | (192,571,253 | ) |      |   | (157,959,779 | )
|                                                  |  |       |      |  |                                  |              |   |      |   |              |  
|Operating Loss                                    |  |       |      |  |                                  | (471,412,647 | ) |      |   | (512,351,899 | )
|                                                  |  |       |      |  |                                  |              |   |      |   |              |  
|Non-operating Income and Revenue                  |  |       |      |  |                                  |              |   |      |   |              |  
|Interest revenue                                  |  |       |      |  |                                  | 11,380,343   |   |      |   | 6,622,931    |  
|Gain on disposal of property, plant and equipment |  | 5     |      |  |                                  |             |   |      |   | 13,404,567   |  
|Foreign exchange gain, net                        |  |       |      |  |                                  | 2,778,876    |   |      |   |             |  
|Rental revenue                                    |  | 5     |      |  |                                  | 26,712,038   |   |      |   | 1,250,964    |  
|Other                                             |  |       |      |  |                                  |             |   |      |   | 8,695,065    |  
|                                                  |  |       |      |  |                                  |              |   |      |   |              |  
|Total non-operating income and revenue            |  |       |      |  |                                  | 40,871,257   |   |      |   | 29,973,527   |  
|                                                  |  |       |      |  |                                  |              |   |      |   |              |  
|Non-operating Expenses and Losses                 |  |       |      |  |                                  |              |   |      |   |              |  
|Interest expense                                  |  |       |      |  |                                  | (11,443,448  | ) |      |   | (6,622,931   | )
|Foreign exchange loss, net                        |  |       |      |  |                                  | (1,184,718   | ) |      |   | (4,258,273   | )
|Impairment loss                                   |  | 4.    | (6)  |  |                                  | (445,000     | ) |      |   | (76,317,523  | )
|Other losses                                      |  |       |      |  |                                  | (7,843,896   | ) |      |   | (1,468,279   | )
|                                                  |  |       |      |  |                                  |              |   |      |   |              |  
|Total non-operating expenses and losses           |  |       |      |  |                                  | (20,917,062  | ) |      |   | (96,959,535  | )
|                                                  |  |       |      |  |                                  |              |   |      |   |              |  
|Loss Before Income Taxes                          |  |       |      |  |                                  | (451,458,452 | ) |      |   | (579,337,907 | )
|                                                  |  |       |      |  |                                  |              |   |      |   |              |  
|Income Tax Expense                                |  | 4.    | (15) |  |                                  |             |   |      |   |             |  
|                                                  |  |       |      |  |                                  |              |   |      |   |              |  
|Net Loss                                          |  |       |      |  | $                                | (451,458,452 | ) |      | $ | (579,337,907 | )
|                                                  |  |       |      |  |                                  |              |   |      |   |              |  

The accompanying notes are an integral part of these financial statements.

See report of independent registered public accounting firm dated March 16, 2009.



4



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Advanced Chip Engineering Technology Inc.

Statements of Changes in Stockholders Equity

(Expressed in New Taiwan Dollars, Except Otherwise Stated)



|                                                           |  |              |               |   |                            |   |              |                     |  |   |                |   |  |       |            |   |  |   |               |  
|---------------------------------------------------------- |  | ------------ | ------------- | - | -------------------------- | - | ------------ | ------------------- |  | - | -------------- | - |  | ----- | ---------- | - |  | - | ------------- | -
|                                                           |  | Common Stock |               |   | Additional Paid-in Capital |   |              | AccumulatedDeficits |  |   | TreasuryStock  |   |  | Total |           
|Balance at January 1, 2007                                 |  | $            | 1,244,137,130 |   |                            | $ |             |                     |  | $ | (331,012,686   | ) |  | $     | (6,795,053 | ) |  | $ | 906,329,391   |  
|Issuance of common stock for cash                          |  |              | 1,000,000,000 |   |                            |   | 200,000,000  |                     |  |   |               |   |  |       |           |   |  |   | 1,200,000,000 |  
|Net loss for 2007                                          |  |              |              |   |                            |   |             |                     |  |   | (451,458,452   | ) |  |       |           |   |  |   | (451,458,452  | )
|                                                           |  |              |               |   |                            |   |              |                     |  |   |                |   |  |       |            |   |  |   |               |  
|Balance at December 31, 2007                               |  |              | 2,244,137,130 |   |                            |   | 200,000,000  |                     |  |   | (782,471,138   | ) |  |       | (6,795,053 | ) |  |   | 1,654,870,939 |  
|Capital reserve transferred to offset accumulated deficits |  |              |              |   |                            |   | (200,000,000 | )                   |  |   | 200,000,000    |   |  |       |           |   |  |   |              |  
|Net loss for 2008                                          |  |              |              |   |                            |   |             |                     |  |   | (579,337,907   | ) |  |       |           |   |  |   | (579,337,907  | )
|Treasury stock cancellation                                |  |              | (6,177,320    | ) |                            |   |             |                     |  |   | (617,733       | ) |  |       | 6,795,053  |   |  |   |              |  
|                                                           |  |              |               |   |                            |   |              |                     |  |   |                |   |  |       |            |   |  |   |               |  
|Balance at December 31, 2008                               |  | $            | 2,237,959,810 |   |                            | $ |             |                     |  | $ | (1,162,426,778 | ) |  | $     |           |   |  | $ | 1,075,533,032 |  
|                                                           |  |              |               |   |                            |   |              |                     |  |   |                |   |  |       |            |   |  |   |               |  

The accompanying notes are an integral part of these financial statements.

See report of independent registered public accounting firm dated March 16, 2009.



5



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Advanced Chip Engineering Technology Inc.

Statements of Cash Flows

(Expressed in New Taiwan Dollars, Except Otherwise Stated)



|                                                                           |  |                                  |               |   |      |   |              |  
|-------------------------------------------------------------------------- |  | -------------------------------- | ------------- | - | ---- | - | ------------ | -
|                                                                           |  | For the years ended December 31, |              
|                                                                           |  | 2007                             |               |   | 2008 |  
|Cash flows from operating activities:                                      |  |                                  |               |   |      |   |              |  
|Net loss                                                                   |  | $                                | (451,458,452  | ) |      | $ | (579,337,907 | )
|Adjustments to reconcile net loss to net cash used in operating activities |  |                                  |               |   |      |   |              |  
|Depreciation                                                               |  |                                  | 115,069,689   |   |      |   | 153,046,518  |  
|Amortization                                                               |  |                                  | 7,731,567     |   |      |   | 3,400,500    |  
|Provision for obsolescence and decline in market value of inventories      |  |                                  | 1,184,718     |   |      |   | 8,292,529    |  
|(Gain) loss on disposal of property, plant and equipment                   |  |                                  |              |   |      |   | (13,404,567  | )
|Prepayment for equipment transferred to expenses                           |  |                                  |              |   |      |   | 467,080      |  
|Impairment loss                                                            |  |                                  | 445,000       |   |      |   | 76,317,523   |  
|(Increase) decrease in:                                                    |  |                                  |               |   |      |   |              |  
|Notes receivable                                                           |  |                                  | 152,250       |   |      |   | (2,052,591   | )
|Accounts receivable                                                        |  |                                  | (24,595,521   | ) |      |   | 15,453,232   |  
|Other financial assets                                                     |  |                                  | 1,782,990     |   |      |   | 3,847,068    |  
|Inventories                                                                |  |                                  | (18,923,346   | ) |      |   | 1,210,410    |  
|Prepayments and other current assets                                       |  |                                  | (3,902,043    | ) |      |   | 3,897,649    |  
|Increase (decrease) in:                                                    |  |                                  |               |   |      |   |              |  
|Notes payable                                                              |  |                                  |              |   |      |   | 572,708      |  
|Accounts payable                                                           |  |                                  | 10,696,321    |   |      |   | (8,723,059   | )
|Accrued expenses and other current liabilities                             |  |                                  | 7,403,972     |   |      |   | (20,485,859  | )
|                                                                           |  |                                  |               |   |      |   |              |  
|Net cash used in operating activities                                      |  |                                  | (354,412,855  | ) |      |   | (357,498,766 | )
|                                                                           |  |                                  |               |   |      |   |              |  
|Cash flows from investing activities:                                      |  |                                  |               |   |      |   |              |  
|(Increase) decrease in restricted deposits                                 |  |                                  | 3,569,688     |   |      |   | (3,000,000   | )
|Acquisition of property, plant and equipment                               |  |                                  | (751,217,982  | ) |      |   | (227,728,890 | )
|Proceeds from disposal of property, plant and equipment                    |  |                                  |              |   |      |   | 128,696,095  |  
|Increase in refundable deposits                                            |  |                                  | (282,000      | ) |      |   |             |  
|Increase in intangible assets and deferred assets                          |  |                                  | (6,639,935    | ) |      |   | (711,000     | )
|                                                                           |  |                                  |               |   |      |   |              |  
|Net cash used in investing activities                                      |  | $                                | (754,570,229  | ) |      | $ | (102,743,795 | )
|                                                                           |  |                                  |               |   |      |   |              |  
|Cash flows from financing activities:                                      |  |                                  |               |   |      |   |              |  
|(Decrease) increase in short-term loans                                    |  | $                                | 335,543,430   |   |      | $ | (302,650,150 | )
|Borrowing of long-term loans                                               |  |                                  |              |   |      |   | 54,000,000   |  
|Repayment of long-term loans                                               |  |                                  | (85,826,482   | ) |      |   | (146,525,791 | )
|Decrease in deposits received                                              |  |                                  |              |   |      |   | (2,022,381   | )
|Issuance of common stock for cash                                          |  |                                  | 1,200,000,000 |   |      |   |             |  
|                                                                           |  |                                  |               |   |      |   |              |  
|Net cash provided by (used in) financing activities                        |  |                                  | 1,449,716,948 |   |      |   | (397,198,322 | )
|                                                                           |  |                                  |               |   |      |   |              |  
|(Decrease) increase in cash and cash equivalents                           |  |                                  | 340,733,864   |   |      |   | (857,440,883 | )
|Cash and cash equivalents, beginning of year                               |  |                                  | 537,221,671   |   |      |   | 877,955,535  |  
|                                                                           |  |                                  |               |   |      |   |              |  
|Cash and cash equivalents, end of year                                     |  | $                                | 877,955,535   |   |      | $ | 20,514,652   |  
|                                                                           |  |                                  |               |   |      |   |              |  
|Supplemental disclosures of cash flows information:                        |  |                                  |               |   |      |   |              |  
|Interest paid during the year (excluding capitalized interest)             |  | $                                | 10,915,765    |   |      | $ | 7,734,194    |  
|                                                                           |  |                                  |               |   |      |   |              |  
|Income tax paid during the year                                            |  | $                                |              |   |      | $ |             |  
|                                                                           |  |                                  |               |   |      |   |              |  



6



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Advanced Chip Engineering Technology Inc.

Statements of Cash Flows (Continued)

(Expressed in New Taiwan Dollars, Except Otherwise Stated)



|                                                                                 |  |                                  |              |   |      |   |             |  
|-------------------------------------------------------------------------------- |  | -------------------------------- | ------------ | - | ---- | - | ----------- | -
|                                                                                 |  | For the years ended December 31, |             
|                                                                                 |  | 2007                             |              |   | 2008 |  
|Investing and financing activities partially affected cash flows                 |  |                                  |              |   |      |   |             |  
|Acquisition of property, plant and equipment                                     |  | $                                | 919,862,891  |   |      | $ | 77,088,890  |  
|Add: Beginning balance of payables to equipment suppliers                        |  |                                  | 33,577,801   |   |      |   | 202,222,710 |  
|Less: Ending balance of payables to equipment suppliers                          |  |                                  | (202,222,710 | ) |      |   | (51,582,710 | )
|                                                                                 |  |                                  |              |   |      |   |             |  
|Cash paid for acquisition of property, plant and equipment                       |  | $                                | 751,217,982  |   |      | $ | 227,728,890 |  
|                                                                                 |  |                                  |              |   |      |   |             |  
|Investing and financing activities not affected cash flows                       |  |                                  |              |   |      |   |             |  
|Current portion of long-term loans                                               |  | $                                | 88,607,221   |   |      | $ | 61,408,824  |  
|                                                                                 |  |                                  |              |   |      |   |             |  
|Capital reduction and capital surplus transferred to offset accumulated deficits |  | $                                |             |   |      | $ | 200,000,000 |  
|                                                                                 |  |                                  |              |   |      |   |             |  
|Treasury stock cancellation                                                      |  | $                                |             |   |      | $ | 6,795,053   |  
|                                                                                 |  |                                  |              |   |      |   |             |  

The accompanying notes are an integral part of these financial statements.

See report of independent registered public accounting firm dated March 16, 2009.



7



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Advanced Chip Engineering Technology Inc.

Notes to Financial Statements

December 31, 2007 and 2008

(Expressed in New Taiwan Dollars, Except
Otherwise Stated)



|1. | History
|-- | -------

Advanced Chip
Engineering Technology Inc. (the Company) was incorporated under the Company Law of the Republic of China in May 2000. The Companys major business activity is to engage in the business of testing and assembling service,
manufacturing and selling integrated circuit. As of December 31, 2008, the Company had 98 employees.



|2. | Summary of Significant Accounting Policies
|-- | ------------------------------------------

The accompanying financial statements are prepared in accordance with the Business Entity Accounting Law, Regulation on Business Entity Accounting Handling and accounting
principles generally accepted in the Republic of China. Significant accounting policies are summarized below:

 ̈Foreign currency transactions

The accounts of the Company are maintained in
New Taiwan dollars. Transactions arising in foreign currencies are translated into New Taiwan dollars at the exchange rates prevailing at the relevant dates of the transactions. The exchange gains or losses arising from the difference between the
exchange rates at the dates of transactions and the related dates of actual receipts and payments are charged to current years results of operations.

Assets and liabilities denominated in foreign currencies are translated into New Taiwan dollars at the exchange rate prevailing at the balance sheet date. Gains or losses from foreign currency
translations are included in current years results of operations.

When a gain or loss on a nonmonetary item is
recognized directly in equity, any exchange component of that gain or loss shall be recognized directly in equity. Conversely, when a gain or loss on a nonmonetary item is recognized in profit or loss, any exchange component of that gain or loss
shall be recognized in profit or loss. However, nonmonetary items that are measured on a historical cost basis are translated using the exchange rate at the transaction date.

 ̈Classification of current and noncurrent items



| | A. | Assets that meet one of the following criteria are classified as current assets; otherwise they are classified as noncurrent assets:
| | -- | ------------------------------------------------------------------------------------------------------------------------------------



| | a) | Assets arising from operating activities that are expected to be realized or consumed, or are intended to be sold within the normal operating cycle;
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------



| | b) | Assets held mainly for trading purposes;
| | -- | ----------------------------------------



| | c) | Assets that are expected to be realized within twelve months from the balance sheet date;
| | -- | -----------------------------------------------------------------------------------------



| | d) | Cash and cash equivalents, excluding restricted cash and cash equivalents and those that are to be exchanged or used to pay off liabilities more than twelve months
after the balance sheet date.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | B. | Liabilities that meet one of the following criteria are classified as current liabilities; otherwise they are classified as noncurrent liabilities:
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------



| | a) | Liabilities arising from operating activities that are expected to be paid off within the normal operating cycle;
| | -- | -----------------------------------------------------------------------------------------------------------------



8



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Advanced Chip Engineering Technology Inc.

Notes to Financial Statements

December 31, 2007 and 2008

(Expressed in New Taiwan Dollars, Except
Otherwise Stated)



| | b) | Liabilities arising mainly from trading activities;
| | -- | ---------------------------------------------------



| | c) | Liabilities that are to be paid off within twelve months from the balance sheet date;
| | -- | -------------------------------------------------------------------------------------



| | d) | Liabilities for which the repayment date cannot be extended unconditionally to more than twelve months after the balance sheet date.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------

 ̈Cash equivalents

Cash and cash equivalents include cash on hand and in banks and other short-term highly liquid investments which are readily convertible to
known amount of cash and which are subject to insignificant risk of changes in value resulting from fluctuations in interest rates.

 ̈Accounts receivable

Accounts receivable are claims
resulting from sale of goods or services. The fair value of accounts receivable is calculated based on the imputed interest rate. Accounts receivable which is collectible within one year, and where the difference between the fair value and the value
at maturity is insignificant is measured at carrying value.

 ̈Allowance for doubtful accounts

Allowance for doubtful accounts is
provided based on the evaluation of the collectibility of ending balances of notes receivable, accounts receivable and other receivables.

 ̈Inventories

Inventories are stated at the lower of aggregate cost or market value. The cost is determined using the weighted-average method. The market value is based on the replacement cost for raw materials and supplies and net realizable value for
work in process, finished goods and merchandise. Allowance for slow moving items and decline in the market value is provided when necessary.

 ̈Property, plant and equipment



| | A. | Property, plant and equipment are stated at cost. Interests incurred on the loans used to bring the assets to the condition and location necessary for their intended
uses are capitalized.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | B. | Depreciation is provided under the straight-line method based on the assets estimated economic service lives. Salvage value of the fully depreciated assets that
are still in use is depreciated based on the re-estimated economic service live.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The estimated
economic service lives of property, plant and equipment are set forth below:

Buildings and facilities of 50 years (including
buildings of 50 years and renovation of 5 to 20 years.)



|                         |  |              
|------------------------ |  | -------------
|Machinery and equipment  |  | 5 to 10 years
|Transportation equipment |  | 2 to 5 years 
|Office equipment         |  | 2 to 5 years 
|Other equipment          |  | 3 to 5 years 
|Leased assets            |  | 3 to 50 years
|Leased equipment         |  | 3 to 5 years 



9



---

Advanced Chip Engineering Technology Inc.

Notes to Financial Statements

December 31, 2007 and 2008

(Expressed in New Taiwan Dollars, Except
Otherwise Stated)



| | C. | Major improvements and renewals are capitalized and depreciated accordingly. Maintenance and repairs are expensed as incurred.
| | -- | ------------------------------------------------------------------------------------------------------------------------------



| | D. | Assets leased out under operating leases are classified as leased assets. Rental income, after subtracting respective depreciation expenses, is recognized in
non-operating income and revenue.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | E. | Rents paid on capital leases are capitalized and depreciated accordingly. Any gain (loss) on the sale and leased back is capitalized and amortized over the lease terms.
For sale and leased back assets, if the fair value is less than the book value, the difference is recognized in the profit or loss.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | F. | Property, plant and equipment that are idle or have no value in use are reclassified to other assets at the lower of the fair value less costs to sell or
book value. The resulting difference is included in current operations. Depreciation provided on these assets is charged to non-operating expense.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

 ̈Intangible assets

Intangible assets, mainly computer software, are stated at cost and amortized over the estimated life of 3-5 years using the straight-line method.

 ̈Impairment of non-financial assets

The Company recognizes impairment loss when there is indication that the recoverable amount of an asset is less than its carrying amount. The recoverable amount is the higher of the fair value less costs to sell and value in use. The fair
value less costs to sell is the amount obtainable from the sale of the asset in an arms length transaction after deducting any direct incremental disposal costs. The value in use is the present value of estimated future cash flows to be
derived from continuing use of the asset and from its disposal at the end of its useful life. When the impairment no longer exists, the impairment loss recognized in prior years shall be recovered. However, impairment loss of goodwill is not
recoverable.

 ̈Pension plan

Under the defined benefit pension plan, net periodic pension costs are recognized in accordance with the actuarial calculations. Net periodic
pension costs include service cost, interest cost, expected return on plan assets, and amortization of unrecognized net transition obligation and gains or losses on plan assets. Unrecognized net transition obligation is amortized on a straight-line
basis over 15 years. Under the defined contribution pension plan, net periodic pension costs are recognized as incurred.

 ̈Income tax

The Company uses inter-period as well as
intra-period tax allocation for income tax. Over or under provision of prior years income tax liabilities is included in current years income tax expense.

Investment tax credits arising from the expenditures incurred on acquisitions of equipment and research and development are recognized in the year the related expenditures are incurred.

The additional 10% income tax on the unappropriated retained earnings is recognized in the year when the stockholder approved the resolution
to retain the earnings.



10



---

Advanced Chip Engineering Technology Inc.

Notes to Financial Statements

December 31, 2007 and 2008

(Expressed in New Taiwan Dollars, Except
Otherwise Stated)



 ̈Revenue, cost and expenses

Revenue is recognized when the earning
process is substantially completed and considered realized or realizable. Costs are recognized when the associated revenue is earned. Expenses, including research and development expenditures, are recognized as incurred.

 ̈Treasury stock



| | A. | Treasury stock is stated at cost.
| | -- | ---------------------------------



| | B. | Upon disposal of the treasury stock, if the disposal price exceeds the cost of the treasury stock disposed of, the difference is credited to capital
reservetreasury stock. If the disposal price is less than the cost, the difference is debited to the capital reserve arising from the treasury stock of the same class. Where the capital reserve is insufficient to cover the difference,
the remaining amount is charged against retained earnings.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | C. | The cost of treasury stock is accounted for on a weighted-average basis.
| | -- | ------------------------------------------------------------------------

 ̈Share-based paymentemployee compensation plan

The employee stock options granted from January 1, 2004 through December 31, 2007 are accounted for in accordance with EITF 92-070, EITF 92-071 and EITF 92-072 Accounting for Employee
Stock Options as prescribed by the Accounting Research and Development Foundation, R.O.C., dated March 17, 2003. Under the share-based employee compensation plan, compensation cost is recognized using the intrinsic value method in
accordance with the R.O.C. SFAS No. 39, Accounting for Share-based Payment.

 ̈Use of estimates

The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts of assets and liabilities and the disclosures of contingent assets and liabilities at the date of the financial statements and the
amounts of revenues and expenses during the reporting period. Actual results could differ from those assumptions and estimates.



|3. | Effects of changes in accounting principles
|-- | -------------------------------------------



| | (1) | Effective January 1, 2008, the Company adopted R.O.C. SFAS No. 39, Accounting for Share-based Payment. The change in accounting principle had no
significant effect on the Companys financial statements for the year ended December 31, 2008.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (2) | Effective January 1, 2008, the Company adopted EITF 96-052 of the Accounting Research and Development Foundation, R.O.C., dated March 16, 2007. The change in
accounting principle had no significant effect on the Companys financial statements for the year ended December 31, 2008.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



11



---

Advanced Chip Engineering Technology Inc.

Notes to Financial Statements

December 31, 2007 and 2008

(Expressed in New Taiwan Dollars, Except
Otherwise Stated)



|4. | Contents of Significant Accounts
|-- | --------------------------------



| | (1) | Cash and Cash Equivalents
| | --- | -------------------------



|                             |  |                  |           
|---------------------------- |  | ---------------- | ----------
|                             |  | December 31,2008
|Cash                         |  |                  |           
|Cash on hand                 |  | $                | 45,286    
|Checking and saving accounts |  |                  | 20,469,366
|                             |  |                  |           
|Total                        |  | $                | 20,514,652
|                             |  |                  |           



| | (2) | Accounts Receivable, Net
| | --- | ------------------------



|                                    |  |                  |           
|----------------------------------- |  | ---------------- | ----------
|                                    |  | December 31,2008
|Accounts receivablethird parties   |  | $                | 9,986,428 
|Accounts receivablerelated parties |  |                  | 2,817,157 
|                                    |  |                  |           
|                                    |  | $                | 12,803,585
|                                    |  |                  |           



| | (3) | Other Financial Assets
| | --- | ----------------------



|                        |  |                  |          
|----------------------- |  | ---------------- | ---------
|                        |  | December 31,2008
|Tax refundable          |  | $                | 1,855,735
|Interest receivable     |  |                  | 6,287    
|Other receivablesother |  |                  | 23,179   
|                        |  |                  |          
|                        |  | $                | 1,885,201
|                        |  |                  |          



| | (4) | Inventories
| | --- | -----------



|                                                                         |  |                  |             |  
|------------------------------------------------------------------------ |  | ---------------- | ----------- | -
|                                                                         |  | December 31,2008 |            
|Raw materials and supplies                                               |  | $                | 21,320,739  |  
|Work in process                                                          |  |                  | 5,594,662   |  
|Finished goods                                                           |  |                  | 7,368,477   |  
|                                                                         |  |                  |             |  
|                                                                         |  |                  | 34,283,878  |  
|Less: Allowance for obsolescence and market value decline in inventories |  |                  | (10,822,284 | )
|                                                                         |  |                  |             |  
|                                                                         |  | $                | 23,461,594  |  
|                                                                         |  |                  |             |  



12



---

Advanced Chip Engineering Technology Inc.

Notes to Financial Statements

December 31, 2007 and 2008

(Expressed in New Taiwan Dollars, Except
Otherwise Stated)



| | (5) | Property, Plant and Equipment
| | --- | -----------------------------



|                         |  |                   |               |                         |   |              |                       |  |   |              |   |  |   |              
|------------------------ |  | ----------------- | ------------- | ----------------------- | - | ------------ | --------------------- |  | - | ------------ | - |  | - | -------------
|                         |  | December 31, 2008
|Asset                    |  | Cost              |               | Accumulateddepreciation |   |              | Accumulatedimpairment |  |   | Book value  
|Land                     |  | $                 | 136,183,400   |                         | $ |             |                       |  | $ | (32,667,900  | ) |  | $ | 103,515,500  
|Building and facilities  |  |                   | 472,796,423   |                         |   | (83,839,340  | )                     |  |   | (3,455,100   | ) |  |   | 385,501,983  
|Machinery and equipment  |  |                   | 1,093,491,482 |                         |   | (443,374,298 | )                     |  |   | (65,586,257  | ) |  |   | 584,530,927  
|Transportation equipment |  |                   | 453,887       |                         |   | (453,887     | )                     |  |   |             |   |  |   |             
|Office equipment         |  |                   | 29,782,649    |                         |   | (17,496,064  | )                     |  |   |             |   |  |   | 12,286,585   
|Other equipment          |  |                   | 13,018,989    |                         |   | (3,485,229   | )                     |  |   |             |   |  |   | 9,533,760    
|Leased equipment         |  |                   | 28,175,645    |                         |   | (5,187,250   | )                     |  |   |             |   |  |   | 22,988,395   
|Construction in progress |  |                   | 2,699,702     |                         |   |             |                       |  |   |             |   |  |   | 2,699,702    
|Prepayment for equipment |  |                   | 199,121,226   |                         |   |             |                       |  |   |             |   |  |   | 199,121,226  
|                         |  |                   |               |                         |   |              |                       |  |   |              |   |  |   |              
|                         |  | $                 | 1,975,723,403 |                         | $ | (553,836,068 | )                     |  | $ | (101,709,257 | ) |  | $ | 1,320,178,078
|                         |  |                   |               |                         |   |              |                       |  |   |              |   |  |   |              

For the years ended December 31, 2007 and 2008,
interest expenses prior to capitalization amounted to $13,993,516 and $13,827,584, respectively, and interest capitalized to property, plant and equipment amounted to $2,550,068 and $7,204,653, respectively, with interest rate ranging from 2.41% to
3.68% and 2.16% to 4.56%, respectively.



| | (6) | Non-financial asset impairment
| | --- | ------------------------------

Effective January 1, 2005, the Company adopted R.O.C. SFAS No. 35, Accounting for Asset Impairment to assess the impairment of its long-lived assets and recognized asset impairment as follows:



|                        |  |                                               |            |                                                     |   |            
|----------------------- |  | --------------------------------------------- | ---------- | --------------------------------------------------- | - | -----------
|                        |  | As of and for the year endedDecember 31, 2007
|                        |  | Impairmentloss                                |            | Accumulatedimpairment ofproperty,plant andequipment
|Machinery and equipment |  | $                                             | 445,000    |                                                     | $ | 25,391,734 
|                        |  |                                               |            |                                                     |   |            
|                        | 
|                        |  | As of and for the year endedDecember 31, 2008
|                        |  | Impairmentloss                                |            | Accumulatedimpairment ofproperty,plant andequipment
|Land                    |  | $                                             | 32,667,900 |                                                     | $ | 32,667,900 
|Building and facilities |  |                                               | 3,455,100  |                                                     |   | 3,455,100  
|Machinery and equipment |  |                                               | 40,194,523 |                                                     |   | 65,586,257 
|                        |  |                                               |            |                                                     |   |            
|                        |  | $                                             | 76,317,523 |                                                     | $ | 101,709,257
|                        |  |                                               |            |                                                     |   |            



13



---

Advanced Chip Engineering Technology Inc.

Notes to Financial Statements

December 31, 2007 and 2008

(Expressed in New Taiwan Dollars, Except
Otherwise Stated)



| | (7) | Short-term Loans
| | --- | ----------------



|                     |  |                  |             
|-------------------- |  | ---------------- | ------------
|                     |  | December 31,2008
|Secured bank loans   |  | $                | 1,745,280   
|Unsecured bank loans |  |                  | 31,148,000  
|                     |  |                  |             
|                     |  | $                | 32,893,280  
|                     |  |                  |             
|Interest rates       |  |                  | 1.96%-3.452%
|                     |  |                  |             

Please refer to Note 6 for assets pledged for
short-term loans.



| | (8) | Long-term Loans
| | --- | ---------------



|                                                                                                                  |  |               |  |         |             |  
|----------------------------------------------------------------------------------------------------------------- |  | ------------- |  | ------- | ----------- | -
|                                                                                                                  |  | December 31,  | 
|                                                                                                                  |  | Interestrates |  | Balance |            
|                                                                                                                  |  | 2008          |  | 2008    |            
|                                                                                                                  |  | %             |  |         |            
|Long-term loan, payable in 90 monthly installments from January 2004 through July 2011, with interest due
monthly |  | 3.685         |  | $       | 127,639,460 |  
|Long-term loan, payable in 20 quarterly installments from July 2008 through April 2013, with interest due monthly |  | 3.020         |  |         | 54,000,000  |  
|                                                                                                                  |  |               |  |         |             |  
|Total long-term loans                                                                                             |  |               |  |         | 181,639,460 |  
|Less: Current portion                                                                                             |  |               |  |         | (61,408,824 | )
|                                                                                                                  |  |               |  |         |             |  
|                                                                                                                  |  |               |  | $       | 120,230,636 |  
|                                                                                                                  |  |               |  |         |             |  

There is no unused facility as of December 31, 2008.

Please refer to Note 6 for assets pledged for long-term loans.



| | (9) | Pensions
| | --- | --------

The Company has
a defined benefit pension plan in accordance with the Labor Standards Law, covering all regular employees for services provided prior to July 1, 2005, and employees who choose to remain under the defined benefit plan subsequent to the
enforcement of the Labor Pension Act (the Act) on July 1, 2005. Under the defined benefit plan, two units are accrued for each year of service for the first 15 years and one unit is accrued for each additional year thereafter,
subject to a maximum of 45 units. Pensions paid upon retirement are based on the number of units accrued and the average monthly salaries and wages of the last six months prior to retirement. The Company contributes monthly an amount equal to 2% of
the employees monthly salaries and wages to the retirement fund deposited with Bank of Taiwan, the trustee. For the year ended December 31, 2007, net pension costs recognized under the defined benefit plan was $75,160. For the year ended
December 31, 2008, the Company recognized curtailment / settlement gain of $3,695,212 (shown as Other in Non-operating Income and Revenue) due to termination of certain employees. The balance of the retirement fund
deposited with Bank of Taiwan was $10,547,771 as of December 31, 2008.

Effective July 1, 2005, under the Act, the
Company has established a funded defined contribution pension plan. Under the Act, current employees have the option to be covered under the defined contribution plan. The Company contributes monthly an amount based on 6% of the employees
monthly salaries and wages to



14



---

Advanced Chip Engineering Technology Inc.

Notes to Financial Statements

December 31, 2007 and 2008

(Expressed in New Taiwan Dollars, Except
Otherwise Stated)



the employees individual pension accounts at the Bureau of Labor Insurance. Benefits accrued are portable upon a change of employment. Pensions are paid by monthly installments or in lump
sum based on the accumulated balances of the employees individual pension accounts. The net pension costs recognized under the defined contribution plan for the years ended December 31, 2007 and 2008 was $9,280,653 and $9,173,053,
respectively.



| | (10) | Common Stock
| | ---- | ------------

On
May 2, 2007, the stockholders resolved to issue 100,000,000 new shares for cash with issuance price at $12 per share. The Board of Directors selected September 5, 2007 as the record date, and the required registered procedures were
completed.

On June 30, 2008, the stockholders resolved to offset its accumulated deficits through transferring of capital
reserves of $200,000,000.

As of December 31, 2008, the Companys authorized and issued common stock amounted to
$3,000,000,000 and $2,237,959,810, represented by 300,000,000 shares (including 6,400,000 shares for technology know-how and 30,000,000 shares reserved for the exercise of employee stock options in the future) and 223,795,981 shares (including
1,806,093 shares for technology know-how), respectively, at par of $10.



| | (11) | Capital Reserve
| | ---- | ---------------

The
R.O.C. Company Law requires that capital reserve shall be exclusively used to offset accumulated deficits or to increase capital and shall not be used for any other purpose. However, all or part of capital reserve arising from paid-in capital in
excess of par value on issuance of common stock and donations can be capitalized once a year, provided that the Company has no accumulated deficits.



| | (12) | Retained Earnings (Accumulated Deficits)
| | ---- | ----------------------------------------

The Companys articles of incorporation provides that net income, after deducting previous years losses and the appropriation of 10% legal reserves, may be appropriated or distributed
proportionately as follows:



| | A. | 84% as dividend paid to stockholders;
| | -- | -------------------------------------



| | B. | 1% as remuneration for directors and supervisors;
| | -- | -------------------------------------------------



| | C. | 15% as employee bonuses.
| | -- | ------------------------

Distributions of stockholders dividends and employee bonuses may be in cash or in the form of common shares or a combination of both, subject to the resolution adopted by the Board of Directors and the approval of the stockholders.

As of December 31, 2007 and 2008, the Company reported accumulated deficits and consequently there was no earnings
available for distribution.



15



---

Advanced Chip Engineering Technology Inc.

Notes to Financial Statements

December 31, 2007 and 2008

(Expressed in New Taiwan Dollars, Except
Otherwise Stated)



| | (13) | Treasury Stock
| | ---- | --------------



| | A. | On July 15, 2004, the Companys Board of Directors authorized the Company to repurchase its own common stock for transferring to its employees. The movement
of treasury stock is as follows:
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                            |  |                                      |  |          |  |          |   |  |        
|--------------------------- |  | ------------------------------------ |  | -------- |  | -------- | - |  | -------
|                            |  | For the year ended December 31, 2007
|Reason for reacquisition    |  | Beginning                            |  | Increase |  | Decrease |   |  | Ending 
|To be reissued to employees |  | 617,732                              |  |         |  |         |   |  | 617,732
|                            |  |                                      |  |          |  |          |   |  |        
|                            | 
|                            |  | For the year ended December 31, 2008
|Reason for reacquisition    |  | Beginning                            |  | Increase |  | Decrease |   |  | Ending 
|To be reissued to employees |  | 617,732                              |  |         |  | (617,732 | ) |  |       
|                            |  |                                      |  |          |  |          |   |  |        



| | B. | According to the Company Law of the Republic of China, total treasury stock shall not exceed 5% of the Companys issued stock. Total repurchased amounts shall not
exceed the sum of retained earnings and the realized capital reserves. The maximum amount and shares that the Company is allowed to repurchase, calculated based on the financial statements as of July 15, 2004, were approximately $35,488,000 and
5,849,614 shares, respectively.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | C. | In accordance with the Company Law of the Republic of China, treasury stock shall not be pledged, nor does it possess voting rights or receive dividends. Treasury stock
shall be transferred to employees within three years from the repurchased date and shares not be reissued within three-year period are to be retired.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | D. | On November 19, 2008, the Companys Board of Directors resolved to retire treasury stock 617,732 shares as it had not been transferred to employees for over
three years from the repurchased date.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (14) | Share-based paymentemployee compensation plan
| | ---- | ----------------------------------------------

There was no compensation cost recognized under the stock-based employee compensation plan for the years ended December 31, 2007 and 2008. The exercise price is based on the par value of the
Companys common stock at the grant date and is not subject to change. The granted employee stock options will expire in 4 years. The employee stock options will be graded vested 1 year after the stock options are granted.



| | A. | As of December 31, 2008, the Companys share-based payment transactions are set forth below:
| | -- | --------------------------------------------------------------------------------------------



|                       |  |                   |  |                 |  |                |  |                                      |  |                                             |  |                                       
|---------------------- |  | ----------------- |  | --------------- |  | -------------- |  | ------------------------------------ |  | ------------------------------------------- |  | --------------------------------------
|Type of agreement      |  | Grantdate         |  | Quantitygranted |  | Contractperiod |  | Vestingconditions                    |  | Actualresignation rate inthe current period |  | Estimated futureemployee turnover rate
|Employee stock options |  | 96.3.31-96.12.30- |  | 30,000,000      |  | Four years     |  | Graded vested oneyear after thegrant |  | 9.27%                                       |  | 10%                                   



16



---

Advanced Chip Engineering Technology Inc.

Notes to Financial Statements

December 31, 2007 and 2008

(Expressed in New Taiwan Dollars, Except
Otherwise Stated)



| | B. | Details of the employee stock options are set forth below:
| | -- | ----------------------------------------------------------



|                                                  |  |                 |  |                               |    |                 |             |   |                               |   |   
|------------------------------------------------- |  | --------------- |  | ----------------------------- | -- | --------------- | ----------- | - | ----------------------------- | - | --
|                                                  |  | 2007            |  | 2008                         
|Stock options                                     |  | Number ofshares |  | Weightedaverageexercise price |    | Number ofshares |             |   | Weightedaverageexercise price
|Options outstanding at beginning of year          |  |                |  | $                             |   |                 | 30,000,000  |   |                               | $ | 10
|Options granted                                   |  | 30,000,000      |  |                               | 10 |                 |            |   |                               |   |  
|Options exercised                                 |  |                |  |                               |   |                 |            |   |                               |   |  
|Options forfeited / cancelled                     |  |                |  |                               |   |                 | (15,111,000 | ) |                               |   | 10
|                                                  |  |                 |  |                               |    |                 |             |   |                               |   |   
|Options outstanding at end of year                |  | 30,000,000      |  |                               | 10 |                 | 14,889,000  |   |                               |   | 10
|                                                  |  |                 |  |                               |    |                 |             |   |                               |   |   
|Options exercisable at end of year                |  |                |  |                               |   |                 | 5,946,000   |   |                               |   | 10
|                                                  |  |                 |  |                               |    |                 |             |   |                               |   |   
|Options authorized but not granted at end of year |  |                |  |                               |    |                 |            |   |                               |   |   
|                                                  |  |                 |  |                               |    |                 |             |   |                               |   |   



| | C. | As of December 31, 2007 and 2008, the range of exercise price of stock options outstanding was $10, and the weighted-average life was 3.37 years and 2.33 years,
respectively.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | D. | The following sets forth the pro forma net loss based on the assumption that the compensation cost is accounted for using the fair value method (the intrinsic value
method) for the stock options granted before the effectivity of R.O.C. SFAS No. 39, Accounting for Share-based Payment:
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|         |  |                                             |  |                                  |              |   |      |   |              |  
|-------- |  | ------------------------------------------- |  | -------------------------------- | ------------ | - | ---- | - | ------------ | -
|         |  |                                             |  | For the years ended December 31, |             
|         |  |                                             |  | 2007                             |              |   | 2008 |  
|Net loss |  | Net loss stated in the statements of income |  | $                                | (451,458,452 | ) |      | $ | (579,337,907 | )
|         |  |                                             |  |                                  |              |   |      |   |              |  
|         |  | Pro forma net loss                          |  | $                                | (451,458,462 | ) |      | $ | (579,337,907 | )
|         |  |                                             |  |                                  |              |   |      |   |              |  



| | (15) | Income Taxes
| | ---- | ------------



| | A. | Income tax expense and income tax refundable
| | -- | --------------------------------------------



|                                                |      |                                  |             |      |  |   |              |  
|----------------------------------------------- | ---- | -------------------------------- | ----------- | ---- |  | - | ------------ | -
|                                                |      | For the years ended December 31, |            
|                                                | 2007 |                                  |             | 2008 | 
|Income tax calculated at the statutory tax rate |      | $                                |             |      |  | $ |             |  
|Tax effect of permanent differences             |      |                                  | 3,987,415   |      |  |   | (15,660,330  | )
|Tax effect of investment tax credits            |      |                                  | (39,665,025 | )    |  |   | (39,615,817  | )
|Tax effect of loss carryforwards                |      |                                  | (53,963,430 | )    |  |   | (129,568,319 | )
|10% tax on unappropriated earnings              |      |                                  |            |      |  |   |             |  
|Tax effect of valuation allowance               |      |                                  | 89,641,040  |      |  |   | 184,844,466  |  
|                                                |      |                                  |             |      |  |   |              |  
|Income tax expense                              |      |                                  |            |      |  |   |             |  
|Less: Prepaid and withholding taxes             |      |                                  | (683,499    | )    |  |   | (418,718     | )
|                                                |      |                                  |             |      |  |   |              |  
|Income tax refundable                           |      | $                                | (683,499    | )    |  | $ | (418,718     | )
|                                                |      |                                  |             |      |  |   |              |  



17



---

Advanced Chip Engineering Technology Inc.

Notes to Financial Statements

December 31, 2007 and 2008

(Expressed in New Taiwan Dollars, Except
Otherwise Stated)



| | B. | Deferred income tax assets and liabilities:
| | -- | -------------------------------------------



|                                      |  |                  |              |  
|------------------------------------- |  | ---------------- | ------------ | -
|                                      |  | December 31,2008 |             
|Deferred income tax assetscurrent    |  | $                | 22,144,607   |  
|Deferred income tax assetsnoncurrent |  |                  | 740,793,956  |  
|Valuation allowance                   |  |                  | (762,938,563 | )
|                                      |  |                  |              |  
|                                      |  | $                |             |  
|                                      |  |                  |              |  



| | C. | Details of temporary differences, loss carryforwards and investment tax credits resulting in deferred income tax assets and liabilities are as follows:
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------



|                       |  |                   |               |            |   |              |  
|---------------------- |  | ----------------- | ------------- | ---------- | - | ------------ | -
|                       |  | December 31, 2008 |              
|                       |  | Amount            |               | Tax effect |  
|Current items:         |  |                   |               |            |   |              |  
|Temporary differences  |  | $                 | 21,544,208    |            | $ | 5,386,052    |  
|Investment tax credits |  |                   |               |            |   | 16,758,555   |  
|Valuation allowance    |  |                   |               |            |   | (22,144,607  | )
|                       |  |                   |               |            |   |              |  
|                       |  |                   |               |            | $ |             |  
|                       |  |                   |               |            |   |              |  
|Noncurrent items:      |  |                   |               |            |   |              |  
|Temporary differences  |  | $                 | 76,762,524    |            | $ | 19,190,631   |  
|Loss carryforwards     |  |                   | 2,401,327,024 |            |   | 600,331,756  |  
|Investment tax credits |  |                   |               |            |   | 121,271,569  |  
|Valuation allowance    |  |                   |               |            |   | (740,793,956 | )
|                       |  |                   |               |            |   |              |  
|                       |  |                   |               |            | $ |             |  
|                       |  |                   |               |            |   |              |  



| | D. | The Company is eligible for investment tax credits under the Statute for Upgrading Industry. Details as of December 31, 2008 are as follows:
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------



|               |  |                          |  |                   |             |                    |   |                  |  |     
|-------------- |  | ------------------------ |  | ----------------- | ----------- | ------------------ | - | ---------------- |  | ----
|Year generated |  | Qualifying items         |  | Total tax credits |             | Unused tax credits |   | Expiration years
|2005           |  | Machinery and equipment  |  | $                 | 5,445,092   |                    | $ | 5,445,092        |  | 2009
|               |  | Research and development |  |                   | 11,313,463  |                    |   | 11,313,463       |  | 2009
|               |  |                          |  |                  
|2006           |  | Machinery and equipment  |  |                   | 2,944,894   |                    |   | 2,944,894        |  | 2010
|               |  | Research and development |  |                   | 21,615,529  |                    |   | 21,615,529       |  | 2010
|               |  |                          |  |                  
|2007           |  | Machinery and equipment  |  |                   | 41,862,931  |                    |   | 41,862,931       |  | 2011
|               |  | Research and development |  |                   | 32,306,277  |                    |   | 32,306,277       |  | 2011
|               |  |                          |  |                  
|2008           |  | Machinery and equipment  |  |                   | 6,471,292   |                    |   | 6,471,292        |  | 2012
|               |  | Research and development |  |                   | 16,070,646  |                    |   | 16,070,646       |  | 2012
|               |  |                          |  |                   |             |                    |   |                  |  |     
|               |  |                          |  | $                 | 138,030,124 |                    | $ | 138,030,124      |  |     
|               |  |                          |  |                   |             |                    |   |                  |  |     



18



---

Advanced Chip Engineering Technology Inc.

Notes to Financial Statements

December 31, 2007 and 2008

(Expressed in New Taiwan Dollars, Except
Otherwise Stated)



| | E. | As of December 31, 2008, losses available to be carried forward are as follows:
| | -- | -------------------------------------------------------------------------------



|                              |  |                         |  |                                                  |             |                          |   |                  |  |     
|----------------------------- |  | ----------------------- |  | ------------------------------------------------ | ----------- | ------------------------ | - | ---------------- |  | ----
|Year in which losses incurred |  | Amount filed / approved |  | Losses availableto be
carriedforward(tax effect) |             | Unused losscarryforwards |   | Expiration years
|2003                          |  | Approved                |  | $                                                | 106,395,355 |                          | $ | 106,395,355      |  | 2013
|2004                          |  | Approved                |  |                                                  | 70,676,694  |                          |   | 70,676,694       |  | 2014
|2005                          |  | Approved                |  |                                                  | 89,077,634  |                          |   | 89,077,634       |  | 2015
|2006                          |  | Approved                |  |                                                  | 89,460,462  |                          |   | 89,460,462       |  | 2016
|2007                          |  | Filed                   |  |                                                  | 117,550,693 |                          |   | 117,550,693      |  | 2017
|2008                          |  | Expected filing amount  |  |                                                  | 127,170,918 |                          |   | 127,170,918      |  | 2018
|                              |  |                         |  |                                                  |             |                          |   |                  |  |     
|                              |  |                         |  | $                                                | 600,331,756 |                          | $ | 600,331,756      |  |     
|                              |  |                         |  |                                                  |             |                          |   |                  |  |     



| | F. | The Companys income tax returns through the fiscal year 2006 have been assessed by the Tax Authority.
| | -- | ------------------------------------------------------------------------------------------------------



| | G. | Information relating to undistributed retained earnings (accumulated deficits):
| | -- | -------------------------------------------------------------------------------



|                       |  |                   |                |  
|---------------------- |  | ----------------- | -------------- | -
|                       |  | December 31, 2008 |               
|Prior to 1998          |  | $                 |               |  
|After 1998 (inclusive) |  |                   | (1,162,426,778 | )
|                       |  |                   |                |  
|Total                  |  | $                 | (1,162,426,778 | )
|                       |  |                   |                |  



| | H. | Information relating to imputation credit account:
| | -- | --------------------------------------------------

As of December 31, 2008, the balance of the imputation tax credit account was $0.



| | (16) | Personnel, Depreciation and Amortization Expenses
| | ---- | -------------------------------------------------



|                           |  |                                      |             |                               |   |            |  |   |            
|-------------------------- |  | ------------------------------------ | ----------- | ----------------------------- | - | ---------- |  | - | -----------
|                           |  | For the year ended December 31, 2007
|                           |  | Included in cost ofgoods sold        |             | Included in operatingexpenses |   | Total     
|Personnel Expenses:        |  |                                      |             |                               |   |            |  |   |            
|Salaries and wages         |  | $                                    | 111,639,632 |                               | $ | 83,311,631 |  | $ | 194,951,263
|Labor and health insurance |  |                                      | 8,376,315   |                               |   | 5,519,314  |  |   | 13,895,629 
|Pension expense            |  |                                      | 4,776,515   |                               |   | 4,579,298  |  |   | 9,355,813  
|Other                      |  |                                      | 6,390,970   |                               |   | 3,563,860  |  |   | 9,954,830  
|Depreciation               |  |                                      | 90,151,876  |                               |   | 24,917,813 |  |   | 115,069,689
|Amortization               |  |                                      | 543,011     |                               |   | 7,188,556  |  |   | 7,731,567  
|                           | 
|                           |  | For the year ended December 31, 2008
|                           |  | Included in cost ofgoods sold        |             | Included in operatingexpenses |   | Total     
|Personnel Expenses:        |  |                                      |             |                               |   |            |  |   |            
|Salaries and wages         |  | $                                    | 122,058,736 |                               | $ | 80,754,074 |  | $ | 202,812,810
|Labor and health insurance |  |                                      | 8,846,488   |                               |   | 4,703,892  |  |   | 13,550,380 
|Pension expense            |  |                                      | 5,784,739   |                               |   | 3,388,314  |  |   | 9,173,053  
|Other                      |  |                                      | 6,997,865   |                               |   | 3,471,672  |  |   | 10,469,537 
|Depreciation               |  |                                      | 144,858,832 |                               |   | 8,187,686  |  |   | 153,046,518
|Amortization               |  |                                      | 391,056     |                               |   | 3,009,444  |  |   | 3,400,500  



19



---

Advanced Chip Engineering Technology Inc.

Notes to Financial Statements

December 31, 2007 and 2008

(Expressed in New Taiwan Dollars, Except
Otherwise Stated)



| | (17) | Going Concern
| | ---- | -------------

As of
December 31, 2008, the Company has incurred continuous losses with accumulated deficits of $1,166,121,990 and negative cash flows from operations, which raise substantial doubt about the Companys ability to continue as a going concern.
Based on the resolution of Board of Directors on January 20, 2009, the Company has determined to raise funds through disposing assets and look for opportunity to merge with another company. However, the counter-party, detailed terms and price
are still under discussion. Therefore, there is no certainty that the Company will be able to continue as a going concern.

As
the above measures are still under discussion, the Company may not be able to raise sufficient funds for its daily operations, nor liquidating its assets and repaying its debts and liabilities. The Companys financial statements do not include
any adjustments of liquidating value valuation and classification of assets and liabilities that might be necessary should the Company be unable to continue as a going concern.



|5. | Related Party Transactions
|-- | --------------------------



| | (1) | Name and Relationship of Related Parties:
| | --- | -----------------------------------------



|                                                      |  |                                                           
|----------------------------------------------------- |  | ----------------------------------------------------------
|Name of related party                                 |  | Relationship with the Company                             
|King Yuan Electronics Co., Ltd. (KYEC)              |  | The chairman of the Company is KYECs vice-chairman (Note)
|                                                      | 
|Silicon Storage Technology, Inc. (SST)              |  | An equity investor of the Company                         
|                                                      | 
|SST International Limited                             |  | A subsidiary of SST                                       
|                                                      | 
|Silicon Storage Technology Taiwan Ltd. (SST Taiwan) |  | A subsidiary of SST International Limited                 



| | Note: | On June 13, 2008, KYEC reelected directors and supervisors. The chairman of the Company abdicated from KYECs vice-chairman.
| | ----- | ----------------------------------------------------------------------------------------------------------------------------



| | (2) | Significant Related Party Transactions
| | --- | --------------------------------------



| | A. | Operating Revenues
| | -- | ------------------



|     |        |                                  |            |  |        |  |   |            |  |   
|---- | ------ | -------------------------------- | ---------- |  | ------ |  | - | ---------- |  | --
|     |        | For the years ended December 31,
|     | 2007   |                                  | 2008      
|     | Amount |                                  | %          |  | Amount |  | %
|KYEC |        | $                                | 13,577,438 |  | 23     |  | $ | 4,761,899  |  | 6 
|SST  |        |                                  | 473,118    |  |       |  |   | 34,978,580 |  | 42
|     |        |                                  |            |  |        |  |   |            |  |   
|     |        | $                                | 14,050,556 |  | 23     |  | $ | 39,740,479 |  | 48
|     |        |                                  |            |  |        |  |   |            |  |   

The Company operates a testing and packaging business,
and the processing charge depends on the unique traits of each type of product. Therefore, the charges for testing products of related parties are not comparable to those charged to non-related parties. Payment terms offered to related parties are
60 days after the monthly closing, while payment terms offered to other customers are 30-90 days after monthly closing of transactions.



20



---

Advanced Chip Engineering Technology Inc.

Notes to Financial Statements

December 31, 2007 and 2008

(Expressed in New Taiwan Dollars, Except
Otherwise Stated)



| | B. | Accounts receivable:
| | -- | --------------------



|    |        |                   |           |  |   
|--- | ------ | ----------------- | --------- |  | --
|    |        | December 31, 2008
|    | Amount |                   | %        
|SST |        | $                 | 2,817,157 |  | 22
|    |        |                   |           |  |   



| | C. | Other receivables (shown as other financial assets):
| | -- | ----------------------------------------------------



|           |  |                   |        |   |  
|---------- |  | ----------------- | ------ | - | -
|           |  | December 31, 2008
|           |  | Amount            |        | %
|SST Taiwan |  | $                 | 19,849 |   | 1
|           |  |                   |        |   |  

Other receivables were generated mainly from the
rental revenues from KYEC and payments made on behalf of SST Taiwan and KYEC.



| | D. | Service provided by related party was as follows:
| | -- | -------------------------------------------------



|     |  |                                                                          |      |                                 |           |  |   |      
|---- |  | ------------------------------------------------------------------------ | ---- | ------------------------------- | --------- |  | - | -----
|     |  | Transaction                                                              |      | For the years endedDecember 31,
|     |  |                                                                          | 2007 |                                 | 2008     
|KYEC |  | Charges for machinery rental, technical support and outsourcing services |      | $                               | 4,187,393 |  | $ | 5,040
|     |  |                                                                          |      |                                 |           |  |   |      



| | E. | Rental revenue:
| | -- | ---------------



|     |  |               |  |                                 |            |  |   |  
|---- |  | ------------- |  | ------------------------------- | ---------- |  | - | -
|     |  | Leased assets |  | For the years endedDecember 31,
|     |  | 2007          |  | 2008                           
|KYEC |  | Machinery     |  | $                               | 17,350,000 |  | $ | 
|     |  |               |  |                                 |            |  |   |  



| | F. | Asset transactions
| | -- | ------------------

The Company
purchased machinery and equipment from KYEC amounting to $17,700,445 and $0, respectively, in 2007 and 2008.

The Company sold
machinery and equipment to KYEC for $122,976,000 and recorded gains on disposal amounting to $14,789,961 in 2008. There was no related transaction in 2007.



21



---

Advanced Chip Engineering Technology Inc.

Notes to Financial Statements

December 31, 2007 and 2008

(Expressed in New Taiwan Dollars, Except
Otherwise Stated)



|6. | Assets Pledged As Collateral
|-- | ----------------------------



|                                                     |  |                   |             |                        |                                  
|---------------------------------------------------- |  | ----------------- | ----------- | ---------------------- | ---------------------------------
|Account                                              |  | December 31, 2008 |             | Subject of collaterals
|Time deposits (shown in Restricted assetscurrent) |  | $                 | 3,100,000   |                        | Custom duties and short-term loan
|Land (including leased assets)                       |  |                   | 103,515,500 |                        | Short-term and long-term loans   
|Buildings and facilities (including leased assets)   |  |                   | 385,501,983 |                        | Short-term and long-term loans   
|Machinery and equipments                             |  |                   | 70,753,053  |                        | Long-term loans                  
|Leased equipment                                     |  |                   | 22,988,395  |                        | Short-term loan                  
|                                                     |  |                   |             |                        |                                  
|Total                                                |  | $                 | 585,858,931 |                        |                                  
|                                                     |  |                   |             |                        |                                  



|7. | Commitments and Contingencies
|-- | -----------------------------



| | As of December 31, 2008, the unused letter of credit in relation to the purchase of machinery and equipment amounted to approximately USD673,900, EUR121,600 and
JPY34,857,500, respectively. In addition, the unpaid amount in relation to the purchase agreements entered into by the Company with the vendors to purchase machinery and equipment was $105,901,560.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|8. | Significant Disaster Losses
|-- | ---------------------------



| | None.
| | -----



|9. | Significant Subsequent Events
|-- | -----------------------------



| | Based on the resolution of Board of Directors on January 20, 2009, the Company has determined to look for opportunity to merge with another company. However, the
counter-party, detailed terms and price are still under discussion.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | The Company is planning to sell a group of machinery and equipment to another company in order to raise capital for the Companys operation. The selling price is
about $30 million.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|10. | Others
|--- | ------

A. Fair value
of financial instruments



|                                                          |  |                              |             |                            |   |   |  |   |            
|--------------------------------------------------------- |  | ---------------------------- | ----------- | -------------------------- | - | - |  | - | -----------
|                                                          |  | December 31, 2008           
|                                                          |  | Book value                   |             | Fair value                
|                                                          |  | Quotation in anactive market |             | Estimatedusing a valuation
|Non-derivative financial instruments                      |  |                              |             |                            |   |   |  |   |            
|Financial assets:                                         |  |                              |             |                            |   |   |  |   |            
|Financial assets with fair value equal to book value      |  | $                            | 40,836,029  |                            | $ |  |  | $ | 40,836,029 
|Financial liabilities:                                    |  |                              |             |                            |   |   |  |   |            
|Financial liabilities with fair value equal to book value |  |                              | 152,991,746 |                            |   |  |  |   | 152,991,746
|Long-term loans (including current portion)               |  |                              | 181,639,460 |                            |   |  |  |   | 181,639,460
|                                                          |  |                              |            
|Derivative financial instruments                          |  |                              |             |                            |   |   |  |   |            
|None.                                                     |  |                              |             |                            |   |   |  |   |            



22



---

Advanced Chip Engineering Technology Inc.

Notes to Financial Statements

December 31, 2007 and 2008

(Expressed in New Taiwan Dollars, Except
Otherwise Stated)



The methods and assumptions
used to measure the fair value of financial instruments are summarized below:

Financial assets / liabilities with fair value
equal to book value: The carrying amounts of these assets / liabilities approximate fair values due to their short maturities. This applies to cash and cash equivalents, notes and accounts receivable, refundable deposits, short-term loans, notes and
accounts payable.

Long-term loans: Fair value is estimated based on the discounted future cash flows. Discount rate is
determined based on the Companys credit adjusted borrowing rate on long-term loans, which approximate the floating interest rates. Accordingly, the carrying values of the long-term loans approximate their fair values.



|B. | Information on financial assets and liabilities with fair value interest rate risk
|-- | ----------------------------------------------------------------------------------

As of December 31, 2008, there was no financial assets with fair value risk due to the change of interest. The Company has no financial
liabilities with fair value risk due to the change of interest as of December 31, 2008. As of December 31, 2008, the financial assets with cash flow risk due to the change of interest amounted to $19,874,898; the financial liabilities with
cash flow risk due to the change of interest amounted to $214,532,740.



|C. | Procedure of financial risk control and hedge
|-- | ---------------------------------------------

In order to identify, evaluate and manage market risk, credit risk, liquidity risk and cash flow risk, the Company has established a risk management program and carried out procedures to monitor the
fluctuations of exchange rate and interest rate, as well as implement credit controls over its transaction counterparties.

By
considering factors such as changes in economic environment, competition, market value risks, and liquidity requirement, the Company adjusts related positions of financial assets and liabilities in order to optimize its risk exposure, maintain
liquidity and centrally manage all market risks.



|D. | Information on significant financial risks
|-- | ------------------------------------------



| | a. | Market risk
| | -- | -----------

The Company
entered into financial instrument agreements with maturities shorter than one year. Therefore, the market risk is considered to be minimal.



| | b. | Credit risk
| | -- | -----------

The
counterparties of the financial instruments are related parties and reputable companies, with which the Company has established long-term relationships. Thus, the Company believes that its exposure to potential default risk is low.



| | c. | Liquidity risk
| | -- | --------------

The
Company entered into financial instrument agreements with maturities shorter than one year. However, the Company has experienced continuous losses and may not have sufficient working capital for its daily operations. Please refer to Note 4
(17) for further responses proposed by management.



23



---

Advanced Chip Engineering Technology Inc.

Notes to Financial Statements

December 31, 2007 and 2008

(Expressed in New Taiwan Dollars, Except
Otherwise Stated)



| | d. | Cash flow interest rate risk
| | -- | ----------------------------

The Company entered into financial instrument agreements with maturities shorter than one year. Therefore, the Companys exposure to cash flow interest rate risk is considered low.

Long-term liabilities are primarily issued at floating interest rates, which are not exposed to significant cash flow interest rate risk.



|11. | US GAAP Reconciliation
|--- | ----------------------

The accompanying financial statements have been prepared in conformity with, Business Entity Accounting Law, Regulation on Business Entity Accounting Handling and accounting principles generally accepted in the
Republic of China (ROC GAAP), which differ in certain material respects from generally accepted accounting principles in the United States (US GAAP). Such differences involve methods for measuring the amounts shown in the
financial statements, as well as additional disclosures required by US GAAP.

The following is a summary of the material
adjustments to net income and shareholders equity, which would be required in reconciling the significant differences between ROC GAAP and US GAAP:

Reconciliation of net loss:



|                                                 |             |                                  |              |      |  |   |              |  
|------------------------------------------------ | ----------- | -------------------------------- | ------------ | ---- |  | - | ------------ | -
|                                                 |             | For the years ended December 31, |             
|                                                 | 2007        |                                  |              | 2008 | 
|                                                 | (Unaudited) |                                  |              |      | 
|Net loss as reported under ROC GAAP              |             | $                                | (451,458,452 | )    |  | $ | (579,337,907 | )
|US GAAP adjustments:                             |             |                                  |              |      |  |   |              |  
|Compensated absences                             |             |                                  |             |      |  |   | (1,085,466   | )
|Payroll tax associated with share-based payments |             |                                  | (4,036,000   | )    |  |   |             |  
|Employee stock option                            |             |                                  | (59,187,052  | )    |  |   | (41,387,325  | )
|Defined benefit plannet periodic pension cost   |             |                                  |             |      |  |   | (1,886,277   | )
|Long-lived assets impairment                     |             |                                  | (14,578,130  | )    |  |   |             |  
|                                                 |             |                                  |              |      |  |   |              |  
|Total US GAAP adjustments                        |             |                                  | (77,801,182  | )    |  |   | (44,359,068  | )
|Taxation effect                                  |             |                                  |             |      |  |   |             |  
|                                                 |             |                                  |              |      |  |   |              |  
|Net loss under US GAAP                           |             | $                                | (529,259,634 | )    |  | $ | (623,696,975 | )
|                                                 |             |                                  |              |      |  |   |              |  

Reconciliation of stockholders equity:



|                                                      |  |                                  |               |      |   |               |  
|----------------------------------------------------- |  | -------------------------------- | ------------- | ---- | - | ------------- | -
|                                                      |  | For the years ended December 31, |              
|                                                      |  | 2007                             |               | 2008 |  
|                                                      |  | (Unaudited)                      |               |      |  
|Total stockholders equity as reported under ROC GAAP |  | $                                | 1,654,870,939 |      | $ | 1,075,533,032 |  
|US GAAP adjustments:                                  |  |                                  |               |      |   |               |  
|Compensated absences                                  |  |                                  |              |      |   | (1,085,466    | )
|Defined benefit pension plan                          |  |                                  | 180,907       |      |   | 2,782,276     |  
|Taxation effect                                       |  |                                  |              |      |   |              |  
|                                                      |  |                                  |               |      |   |               |  
|Stockholders equity under US GAAP                    |  | $                                | 1,655,051,846 |      | $ | 1,077,229,842 |  
|                                                      |  |                                  |               |      |   |               |  



24



---

Advanced Chip Engineering Technology Inc.

Notes to Financial Statements

December 31, 2007 and 2008

(Expressed in New Taiwan Dollars, Except
Otherwise Stated)



Movement in
stockholders equity in accordance with US GAAP:



|                                               |             |                                  |               |      |  |   |               |  
|---------------------------------------------- | ----------- | -------------------------------- | ------------- | ---- |  | - | ------------- | -
|                                               |             | For the years ended December 31, |              
|                                               | 2007        |                                  |               | 2008 | 
|                                               | (Unaudited) |                                  |               |      | 
|Balance at beginning of year                   |             | $                                | 924,943,521   |      |  | $ | 1,655,051,846 |  
|Issuance of common stock for cash              |             |                                  | 1,200,000,000 |      |  |   |              |  
|Net loss under US GAAP                         |             |                                  | (529,259,634  | )    |  |   | (623,696,975  | )
|Employee stock option  amortized compensation |             |                                  | 59,187,052    |      |  |   | 41,387,325    |  
|Defined benefit pension plan                   |             |                                  | 180,907       |      |  |   | 4,487,646     |  
|                                               |             |                                  |               |      |  |   |               |  
|Balance at end of year                         |             | $                                | 1,655,051,846 |      |  | $ | 1,077,229,842 |  
|                                               |             |                                  |               |      |  |   |               |  

The balance sheet accounts under US GAAP is as follows:



|                                           |  |              |              
|------------------------------------------ |  | ------------ | -------------
|                                           |  | December 31,
|                                           |  | 2008        
|Current Assets                             |  |              |              
|Cash and cash equivalents                  |  | $            | 20,514,652   
|Notes and accounts receivable, net         |  |              | 14,856,176   
|Other financial assets                     |  |              | 1,885,201    
|Inventories                                |  |              | 23,461,594   
|Restricted assets  current                |  |              | 3,100,000    
|Prepayments and other current assets       |  |              | 21,445,331   
|                                           |  |              |              
|                                           |  |              | 85,262,954   
|                                           |  |              |              
|Property, plant and equipment              |  |              | 1,118,357,150
|Intangible assets                          |  |              | 7,025,482    
|Refundable deposits                        |  |              | 480,000      
|Other assets                               |  |              | 201,820,928  
|                                           |  |              |              
|Total Assets                               |  | $            | 1,412,946,514
|                                           |  |              |              
|Currents liabilities                       |  | $            | 215,486,036  
|Long-term and other liabilities            |  |              | 120,230,636  
|                                           |  |              |              
|Total Liabilities                          |  |              | 335,716,672  
|Total Stockholders Equity                 |  |              | 1,077,229,842
|                                           |  |              |              
|Total Liabilities and Stockholders Equity |  | $            | 1,412,946,514
|                                           |  |              |              



25



---

Advanced Chip Engineering Technology Inc.

Notes to Financial Statements

December 31, 2007 and 2008

(Expressed in New Taiwan Dollars, Except
Otherwise Stated)



Cash and cash flow
statements

Under ROC GAAP, all certificates of deposit are classified as cash and cash equivalents. Under
US GAAP, cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and have original maturities of three months or less. Summarized cash flow information under US GAAP would be
presented as follows:



|                                                    |             |                                  |               |      |  |   |              |  
|--------------------------------------------------- | ----------- | -------------------------------- | ------------- | ---- |  | - | ------------ | -
|                                                    |             | For the years ended December 31, |              
|                                                    | 2007        |                                  |               | 2008 | 
|                                                    | (Unaudited) |                                  |               |      | 
|Net cash used in operating activities               |             | $                                | (354,412,855  | )    |  | $ | (357,498,766 | )
|Net cash used in investing activities               |             |                                  | (754,570,229  | )    |  |   | (102,743,795 | )
|Net cash provided by (used in) financial activities |             |                                  | 1,449,716,948 |      |  |   | (397,198,322 | )
|                                                    |             |                                  |               |      |  |   |              |  
|Net decrease in cash and cash equivalents           |             |                                  | 340,733,864   |      |  |   | (857,440,883 | )
|Cash and cash equivalents at beginning of the year  |             |                                  | 537,221,671   |      |  |   | 877,955,535  |  
|                                                    |             |                                  |               |      |  |   |              |  
|Cash and cash equivalents at the end of the year    |             | $                                | 877,955,535   |      |  | $ | 20,514,652   |  
|                                                    |             |                                  |               |      |  |   |              |  

Comprehensive income

Comprehensive income under ROC GAAP for the years ended December 31, 2007 and 2008 are summarized as follows:



|                                         |             |                                  |              |      |  |   |              |  
|---------------------------------------- | ----------- | -------------------------------- | ------------ | ---- |  | - | ------------ | -
|                                         |             | For the years ended December 31, |             
|                                         | 2007        |                                  |              | 2008 | 
|                                         | (Unaudited) |                                  |              |      | 
|Net loss                                 |             | $                                | (451,458,452 | )    |  | $ | (579,337,907 | )
|Other comprehensive income, net of taxes |             |                                  |              |      |  |   |              |  
|Net actuarial gain not recognized        |             |                                  | 180,907      |      |  |   | 2,782,276    |  
|                                         |             |                                  |              |      |  |   |              |  
|Comprehensive loss                       |             | $                                | (451,277,545 | )    |  | $ | (576,555,631 | )
|                                         |             |                                  |              |      |  |   |              |  

The significant accounting policies for the reconciliation from ROC GAAP to US GAAP are as follows:



|(1) | Compensated absences
|--- | --------------------

Under ROC GAAP, the Company is not required to accrue for unused employees vacation leave at the end of each year. However, under US GAAP, SFAS No. 43, Accounting for Compensated
Absences, it is required for an employer to accrue a liability for employees compensation for future absences if all of the following conditions are met: i) the employers obligation relating to employees rights to
receive compensation for future absences is attributable to employees services already rendered, ii) the obligation relates to rights that vest or accumulate, iii) payment of the compensation is probable, and iv) the amount can
be reasonably estimated. Accordingly, under US GAAP, unused vacation that can be carried over to the next year has to be accrued for at each balance sheet date to properly record the expense in the period in which the employee provided the
services.



26



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Advanced Chip Engineering Technology Inc.

Notes to Financial Statements

December 31, 2007 and 2008

(Expressed in New Taiwan Dollars, Except
Otherwise Stated)



|(2) | Stock-based payment  employee compensation plan
|--- | ------------------------------------------------



| | A. | In 2006, the Company was authorized to issue employee stock options. The total number of options to be granted under the plan is equivalent to 30,000,000 shares of the
Companys common stock, and all options were granted to employees in 2007. Under ROC GAAP, the Company applies the intrinsic value method to recognize the difference between the fair value of the stock and the exercise price of its employee
stock option as compensation expense over the requisite service period, if any, and pro forma information regarding net loss is required as if the Company had accounted for the employee stock options under the fair value method.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | B. | For computing the fair value of options granted, we use the Black-Scholes option-pricing model with input assumptions of expected volatility, expected life, expected
dividend rate and expected risk-free rate of return. We applied the historical volatility based on the historical stock price volatility over the historical time period commensurate with the expected term of the employee stock option of similar
listed companies. The expected term is based on expected holding period. We estimated dividend yield by historical experience. Besides, we used the yield of Taiwan Government Bond with the contract term equal to the expected term of the share
options as our risk-free interest rate pursuant to SFAS No. 123 (R), which required entities based in jurisdiction outside the United States to use the implied yield of zero-coupon government bonds currently available in the market where the
shares are primarily traded when estimating the risk-free interest rate. The fair value of the Companys stock options used to compute the 2007 and 2008 compensation expense is the estimated present value at grant date using the Black-Scholes
option pricing model with the following weighted average assumptions:
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                        |  |                  
|----------------------- |  | -----------------
|Volatility              |  | 52.11% - 55.19%  
|                        |  |                  
|Risk-free interest rate |  | 3.84% - 4.54%    
|                        |  |                  
|Expected holding period |  | 2.96 - 3.11 years
|                        |  |                  
|Dividend yield          |  | 0%               
|                        |  |                  

Note: No options granted in 2008.



|(3) | Pension
|--- | -------



| | Under ROC GAAP, net periodic pension costs of defined benefit pension plan are recognized in accordance with actuarial calculations.
| | ------------------------------------------------------------------------------------------------------------------------------------



| | Under US GAAP, a defined benefit pension plan is accounted for pursuant to SFAS 87, Employers Accounting for Pension and No. 158 (effective
for the Company in its fiscal year ending after December 15, 2006 with early adoption encouraged), Employers Accounting for Defined Benefit Pension and Other Postretirement Plans  an amendment of FASB Statements No. 87,
88, 106, and 132(R), which requires the recognition of the overfunded or underfunded status of a defined benefit pension plan as an asset or liability and changes in the funded status to be recognized through other comprehensive income, net of
tax. Unrecognized gains and losses, prior service costs, or transition assets and liabilities as components of net periodic benefit cost of the period in accordance with SFAS No. 87 are now recognized as a component of accumulated other
comprehensive income.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



27



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Advanced Chip Engineering Technology Inc.

Notes to Financial Statements

December 31, 2007 and 2008

(Expressed in New Taiwan Dollars, Except
Otherwise Stated)



|(4) | Impairment of long-lived assets
|--- | -------------------------------



| | Under both ROC GAAP and US GAAP, the Company is required to valuate whether long-lived assets are subject to impairment. Impairment test is performed whenever
event occurs or evidence indicates the carrying amount of an asset may not be recoverable.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | Under ROC GAAP, ROC SFAS No. 35, Accounting for Assets Impairment, effective for fiscal years ended on and after December 31, 2005 and interim
period within the fiscal year, a long-lived asset is considered impaired when the anticipated recoverable amount is less than the assets carrying value. Recoverable amount is measured as the higher of net selling price or value in use
(discounted cash flows). The difference between the recoverable amount and the assets carrying amount is recognized as a loss in earnings. Reversal of impairment loss is made when there has been a change in economic conditions or in the
expected use of the asset or asset group such that the previously recognized impairment loss no longer exits or has diminished. Upon the reversal of impairment loss, the carrying value of the asset or asset group should be increased to its
recoverable amount, adjusted for any depreciation (amortization) expense that would have been recognized had the asset or asset group not been impaired. Asset impairment loss is presented as a non-operating expense, and impairment recoveries are
presented as non-operating income.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | Under US GAAP, a long-lived asset is considered impaired when the anticipated undiscounted cash flows are less than the assets carrying value. In that event,
a loss is recognized based on the amount by which the carrying value exceeds the fair value of the long-lived assets. The estimate of fair value is generally based on quoted market prices, on the best available information, including prices for
similar assets and the results of using other valuation techniques, or discounted cash flows. In addition, impairment loss cannot be reversed for long-lived assets or asset group to be held and used, as the impairment loss results in a new cost
basis for the assets. Impairment loss is presented as an operating expense. In 2008, management has recognized impairment loss of $76,317,523 based on internal estimates of fair values under ROC GAAP, and there is no further adjustment under US
GAAP.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(5) | Prepayment of property, plant and equipment
|--- | -------------------------------------------



| | Under ROC GAAP, prepayment of property, plant and equipment is presented as part of property, plant and equipment.
| | ------------------------------------------------------------------------------------------------------------------



| | Under US GAAP, prepayment of property, plant and equipment should be presented as other assets.
| | -----------------------------------------------------------------------------------------------



|(6) | Technology know-how
|--- | -------------------



| | In years 2000 and 2002, the founders of the Company contributed their technology know-how in exchange for the Companys stock. Under ROC GAAP, the Company recorded
the technology know-how based on a valuation report with corresponding entries to common stock and additional paid-in capital. The technology know-how was amortized over its estimated economic life using the straight-line method.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | Under US GAAP, Staff Accounting Bulletin (SAB) Topic 5-G, Acquisition of Assets from Promoters and Stockholders in Exchange for Common Stock, states
that transfers of nonmonetary assets to a company by its promoters or stockholders in exchange for stock prior to or at the time of the companys initial public offering normally should be recorded at the transferors historical cost
basis determined under generally accepted accounting principles.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



28



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Advanced Chip Engineering Technology Inc.

Notes to Financial Statements

December 31, 2007 and 2008

(Expressed in New Taiwan Dollars, Except
Otherwise Stated)



|(7) | Employee bonus accrual
|--- | ----------------------



| | Under ROC GAAP, the Company accrued a bonus liability based on a policy (Bonus Policy) to pay an annual bonus to its employees. The Company does not have a
legal obligation to pay the bonus. The existence of contracts which places conditions on when the Company will pay the bonus, such as the need to achieve future profitability or to maintain employment with the Company do not overcome the presumption
that a bonus liability should be recorded under ROC GAAP.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | Under US GAAP, a bonus accrual is generally accounted for as a contingent liability. The existence of conditions which affect the likelihood of the future outcome
will need to be assessed and an accrual will only be made when such conditions are determined to be probable and when the amount can be reasonably estimated.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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